Table of Contents
Ultra Short Term Bond Funds
Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average portfolio maturity of these funds is generally little higher than that of Liquid Funds.
Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).
Ultra Short Term Bond Funds Features
Fund Type
Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the redemption day.
NAV of Ultra Short Term Funds
For Ultra Short Term Funds, the purchase happens on a (T+0) basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.
Exit Load of Ultra Short Term Bond Funds
Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.
Returns of Ultra Short Term Funds
The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).
Redemption Ultra Short Term Funds
In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.
Minimum Amount of Investment
The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).
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Investment Avenues of Ultra Short Mutual Funds
Ultra Short Term Funds are fixed income investments that invest in money market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.
Why Invest in Best Ultra Short Term Funds?
Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less volatility.
Taxation of Ultra Short Term Funds
In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.
However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.
| Liquid Funds | Liquid Funds | Ultra Short Funds | Ultra Short Funds | |
|---|---|---|---|---|
| Class of Investors | Individuals/HUF | Corporate | Individuals/HUF | Corporate |
| Dividend Distribution Tax | 27.038% | 32.445% | 13. 519% | 32.445% |
| Short Term Capital Gains | As per income tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates |
(Please note, investors are advised to consult their Tax consultant before taking any decisions)
Best Performing Ultra Short Debt Funds to Invest FY 20 - 21
Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.
Fund NAV Net Assets (Cr) 1 MO (%) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) Aditya Birla Sun Life Savings Fund Growth ₹415.352
↑ 0.20 ₹14,532 0.6 1.4 4.3 7.4 7.7 8 ICICI Prudential Ultra Short Term Fund Growth ₹21.1709
↑ 0.01 ₹7,413 0.6 1.5 3.8 7.2 7.5 7.9 SBI Magnum Ultra Short Duration Fund Growth ₹4,607.26
↑ 1.55 ₹10,122 0.4 1.1 3.3 6.4 7.4 7.4 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 19 Oct 20
The primary objective of the schemes is to generate regular income through investments in debt and money market instruments. Income maybe generated through the receipt of coupon payments or the purchase and sale of securities in the underlying portfolio. The schemes will under normal market conditions, invest its net assets in fixed income securities, money market instruments, cash and cash equivalents. Aditya Birla Sun Life Savings Fund is a Debt - Ultrashort Bond fund was launched on 16 Apr 03. It is a fund with Moderately Low risk and has given a Below is the key information for Aditya Birla Sun Life Savings Fund Returns up to 1 year are on (Erstwhile ICICI Prudential Regular Income Fund) The fund’s objective is to generate regular income through investments primarily in debt and money market instruments. As a secondary objective, the Scheme also seeks to generate long term capital appreciation from the portion of equity investments under the Scheme. ICICI Prudential Ultra Short Term Fund is a Debt - Ultrashort Bond fund was launched on 3 May 11. It is a fund with Moderate risk and has given a Below is the key information for ICICI Prudential Ultra Short Term Fund Returns up to 1 year are on (Erstwhile SBI Magnum InstaCash Fund) To provide the investors an opportunity to earn returns through investment in
debt & money market securities, while having the benefit of a very high degree of liquidity. SBI Magnum Ultra Short Duration Fund is a Debt - Ultrashort Bond fund was launched on 21 May 99. It is a fund with Low risk and has given a Below is the key information for SBI Magnum Ultra Short Duration Fund Returns up to 1 year are on 1. Aditya Birla Sun Life Savings Fund
CAGR/Annualized return of 7.8% since its launch. Ranked 6 in Ultrashort Bond category. Return for 2019 was 8.5% , 2018 was 7.6% and 2017 was 7.2% . Aditya Birla Sun Life Savings Fund
Growth Launch Date 16 Apr 03 NAV (19 Oct 20) ₹415.352 ↑ 0.20 (0.05 %) Net Assets (Cr) ₹14,532 on 30 Sep 20 Category Debt - Ultrashort Bond AMC Birla Sun Life Asset Management Co Ltd Rating ☆☆☆☆☆ Risk Moderately Low Expense Ratio 0.35 Sharpe Ratio 2.52 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 4.51% Effective Maturity 6 Months 18 Days Modified Duration 5 Months 26 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 15 ₹10,000 30 Sep 16 ₹10,926 30 Sep 17 ₹11,772 30 Sep 18 ₹12,546 30 Sep 19 ₹13,688 30 Sep 20 ₹14,715 Returns for Aditya Birla Sun Life Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Oct 20 Duration Returns 1 Month 0.6% 3 Month 1.4% 6 Month 4.3% 1 Year 7.4% 3 Year 7.7% 5 Year 8% 10 Year 15 Year Since launch 7.8% Historical performance (Yearly) on absolute basis
Year Returns 2019 8.5% 2018 7.6% 2017 7.2% 2016 9.2% 2015 8.9% 2014 9.7% 2013 9.5% 2012 9.7% 2011 9.2% 2010 5.8% Fund Manager information for Aditya Birla Sun Life Savings Fund
Name Since Tenure Sunaina Cunha 11 Oct 14 5.98 Yr. Kaustubh Gupta 15 Jul 11 9.22 Yr. Data below for Aditya Birla Sun Life Savings Fund as on 30 Sep 20
Asset Allocation
Asset Class Value Cash 50.75% Debt 49.25% Debt Sector Allocation
Sector Value Corporate 53.51% Cash Equivalent 32.97% Government 13.01% Securitized 0.51% Credit Quality
Rating Value AA 10.3% AAA 89.7% Top Securities Holdings / Portfolio
Name Holding Value Quantity Mahindra & Mahindra Financial Services Limited
Debentures | -3% ₹453 Cr 4,450 Shriram Transport Finance Company Limited
Debentures | -3% ₹371 Cr 3,750 REC Limited
Debentures | -2% ₹331 Cr 3,200 Housing Development Finance Corporation Limited
Debentures | -2% ₹295 Cr 2,925 Rural Electrification Corporation Limited
Debentures | -2% ₹270 Cr 2,650 6.81% MH SDL 2020
Sovereign Bonds | -2% ₹261 Cr 26,000,000 Muthoot Finance Limited
Debentures | -2% ₹242 Cr 2,350 182 DTB 17122020
Sovereign Bonds | -2% ₹233 Cr 23,500,000
↑ 23,500,000 Reliance Industries Limited
Debentures | -2% ₹233 Cr 2,315 Rural Electrification Corporation Limited
Debentures | -2% ₹231 Cr 2,250 2. ICICI Prudential Ultra Short Term Fund
CAGR/Annualized return of 8.2% since its launch. Ranked 27 in Ultrashort Bond category. Return for 2019 was 8.4% , 2018 was 7.5% and 2017 was 6.9% . ICICI Prudential Ultra Short Term Fund
Growth Launch Date 3 May 11 NAV (19 Oct 20) ₹21.1709 ↑ 0.01 (0.05 %) Net Assets (Cr) ₹7,413 on 30 Sep 20 Category Debt - Ultrashort Bond AMC ICICI Prudential Asset Management Company Limited Rating ☆☆☆ Risk Moderate Expense Ratio 0.96 Sharpe Ratio 2.42 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load 0-1 Months (0.5%),1 Months and above(NIL) Yield to Maturity 5.24% Effective Maturity 6 Months Modified Duration 5 Months 8 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 15 ₹10,000 30 Sep 16 ₹10,952 30 Sep 17 ₹11,818 30 Sep 18 ₹12,566 30 Sep 19 ₹13,656 30 Sep 20 ₹14,655 Returns for ICICI Prudential Ultra Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Oct 20 Duration Returns 1 Month 0.6% 3 Month 1.5% 6 Month 3.8% 1 Year 7.2% 3 Year 7.5% 5 Year 7.9% 10 Year 15 Year Since launch 8.2% Historical performance (Yearly) on absolute basis
Year Returns 2019 8.4% 2018 7.5% 2017 6.9% 2016 9.8% 2015 9.1% 2014 14.8% 2013 3.1% 2012 9.4% 2011 2010 Fund Manager information for ICICI Prudential Ultra Short Term Fund
Name Since Tenure Manish Banthia 15 Nov 16 3.88 Yr. Ritesh Lunawat 15 Jun 17 3.3 Yr. Data below for ICICI Prudential Ultra Short Term Fund as on 30 Sep 20
Asset Allocation
Asset Class Value Cash 54.17% Debt 45.83% Debt Sector Allocation
Sector Value Corporate 54.84% Cash Equivalent 41.9% Government 3.26% Credit Quality
Rating Value A 2.97% AA 28.79% AAA 68.24% Top Securities Holdings / Portfolio
Name Holding Value Quantity REC Limited
Debentures | -4% ₹293 Cr 2,850
↑ 2,850 Reliance Ports and Terminals Limited
Debentures | -3% ₹212 Cr 2,019
↑ 992 Manappuram Finance Limited
Debentures | -3% ₹206 Cr 2,000 Housing Development Finance Corporation Limited
Debentures | -2% ₹153 Cr 1,500
↑ 1,500 Housing Development Finance Corporation Limited
Debentures | -2% ₹152 Cr 1,500 Tata Value Homes Limited
Debentures | -2% ₹151 Cr 1,500 Aspire Home Finance Corporation Limited
Debentures | -2% ₹151 Cr 1,500 LIC Housing Finance Limited
Debentures | -2% ₹147 Cr 1,450
↑ 450 Reliance Industries Limited
Debentures | -2% ₹141 Cr 1,400 Power Finance Corporation Limited
Debentures | -2% ₹139 Cr 1,350
↑ 1,350 3. SBI Magnum Ultra Short Duration Fund
CAGR/Annualized return of 7.4% since its launch. Return for 2019 was 8% , 2018 was 7.9% and 2017 was 6.6% . SBI Magnum Ultra Short Duration Fund
Growth Launch Date 21 May 99 NAV (19 Oct 20) ₹4,607.26 ↑ 1.55 (0.03 %) Net Assets (Cr) ₹10,122 on 30 Sep 20 Category Debt - Ultrashort Bond AMC SBI Funds Management Private Limited Rating ☆☆☆ Risk Low Expense Ratio 0.28 Sharpe Ratio 2.85 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 4% Effective Maturity 5 Months 19 Days Modified Duration 5 Months 8 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 15 ₹10,000 30 Sep 16 ₹10,788 30 Sep 17 ₹11,512 30 Sep 18 ₹12,340 30 Sep 19 ₹13,392 30 Sep 20 ₹14,277 Returns for SBI Magnum Ultra Short Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Oct 20 Duration Returns 1 Month 0.4% 3 Month 1.1% 6 Month 3.3% 1 Year 6.4% 3 Year 7.4% 5 Year 7.4% 10 Year 15 Year Since launch 7.4% Historical performance (Yearly) on absolute basis
Year Returns 2019 8% 2018 7.9% 2017 6.6% 2016 7.7% 2015 8.3% 2014 9% 2013 9.3% 2012 9.3% 2011 8.7% 2010 5.4% Fund Manager information for SBI Magnum Ultra Short Duration Fund
Name Since Tenure Rajeev Radhakrishnan 1 May 10 10.42 Yr. Data below for SBI Magnum Ultra Short Duration Fund as on 30 Sep 20
Asset Allocation
Asset Class Value Cash 66.57% Debt 33.43% Debt Sector Allocation
Sector Value Corporate 40.34% Cash Equivalent 39.72% Government 19.16% Securitized 0.78% Credit Quality
Rating Value AA 5.3% AAA 94.7% Top Securities Holdings / Portfolio
Name Holding Value Quantity Rural Electrification Corporation Limited
Debentures | -7% ₹689 Cr 6,750 364 DTB 29072021
Sovereign Bonds | -5% ₹486 Cr 50,000,000 91 DTB 03122020
Sovereign Bonds | -4% ₹398 Cr 40,000,000
↑ 40,000,000 Housing Development Finance Corporation Limited
Debentures | -4% ₹379 Cr 3,750 Mahindra & Mahindra Financial Services Limited
Debentures | -4% ₹373 Cr 3,000 182 DTB 04022021
Sovereign Bonds | -3% ₹346 Cr 35,000,000 Housing Development Finance Corporation Limited
Debentures | -2% ₹231 Cr 2,250 Muthoot Finance Limited
Debentures | -2% ₹191 Cr 1,880,000
↓ -250,000 Manappuram Finance Limited
Debentures | -2% ₹165 Cr 1,650 LIC Housing Finance Limited
Debentures | -1% ₹152 Cr 1,500
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